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Earlier this month I wrote about why I really like United Parcel Service (UPS), but the stock never seems to get cheap enough to satisfy my requirements for a purchase. However, all of that seems to be changing as UPS is guiding down for earnings per share going forward. Specifically, UPS is estimating earnings of $0.85/share, down from its prior estimate of about $1.00/share. Its package volume is down, and fuel is up. The shares were hammered 6% on Tuesday.
I will have to run my valuation model on UPS to see where I believe a good entry point might be. However, here are some interesting facts I found by just scratching the surface:
- Its P/E ratio of 15.5x trailing earnings is a 5-year low, and well below the average P/E of each of the last 10 years.
- 2003 is the last year the stock last traded down to these levels ($62.26)
- Its 2.9% yield is, at least, a 10-year high.
UPS has been a solid grower of dividends over the past several years, and it has a phenomenal brand and moat. I see UPS as a business for the ages that will still be around, and more importantly, continue to be essential 50 years from now.
As I mentioned in my previous post, I really like its recent move into logistics and specialized, convenient, services for businesses of all shapes and sizes. It is a little known fact that UPS actually performs tasks such as fixing laptops for Toshiba (TOSBF.PK), and picking and shipping running shoes for Nike (NKE). These service-oriented tasks that surround the shipping experience are all added value, and will only increase in popularity as transportation costs rise, workforce ages, and the global economy becomes increasingly intertwined.
I may get my chance yet to open up a position in this global package delivery and logistics leader. I'm staying tuned. Now only if I had some money lying around...
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